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    Solutions-Chapter 2

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    Saurabh Singh
    The document contains several examples of manufacturing overhead costs and calculations: 1) It shows a cost summary for Job 325 with direct material costs of $10,000, direct labor costs of $4,000 (250 hours at $16 per hour), and manufacturing overhead of $6,250 (250 hours at $25 per hour). 2) It provides schedules of cost of goods manufactured and income statements for two companies, Satterfield's Custom Glass and Terra Cotta Designs, showing direct costs, manufacturing overhead, and net income calculations. 3) It gives examples of calculating predetermined overhead rates based on direct labor costs and hours as well as machine hours, and applying different overhead rates to sample

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    Solutions-Chapter 2

    Uploaded by

    Saurabh Singh
    146 views5 pages
    The document contains several examples of manufacturing overhead costs and calculations: 1) It shows a cost summary for Job 325 with direct material costs of $10,000, direct labor costs of $4,000 (250 hours at $16 per hour), and manufacturing overhead of $6,250 (250 hours at $25 per hour). 2) It provides schedules of cost of goods manufactured and income statements for two companies, Satterfield's Custom Glass and Terra Cotta Designs, showing direct costs, manufacturing overhead, and net income calculations. 3) It gives examples of calculating predetermined overhead rates based on direct labor costs and hours as well as machine hours, and applying different overhead rates to sample

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    solutions-Chapter 2

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    The document contains several examples of manufacturing overhead costs and calculations: 1) It shows a cost summary for Job 325 with direct material costs of $10,000, direct labor costs of $4,000 (250 hours at $16 per hour), and manufacturing overhead of $6,250 (250 hours at $25 per hour). 2) It provides schedules of cost of goods manufactured and income statements for two companies, Satterfield's Custom Glass and Terra Cotta Designs, showing direct costs, manufacturing overhead, and net income calculations. 3) It gives examples of calculating predetermined overhead rates based on direct labor costs and hours as well as machine hours, and applying different overhead rates to sample

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    146 views5 pages

    Solutions-Chapter 2

    Uploaded by

    Saurabh Singh
    The document contains several examples of manufacturing overhead costs and calculations: 1) It shows a cost summary for Job 325 with direct material costs of $10,000, direct labor costs of $4,000 (250 hours at $16 per hour), and manufacturing overhead of $6,250 (250 hours at $25 per hour). 2) It provides schedules of cost of goods manufactured and income statements for two companies, Satterfield's Custom Glass and Terra Cotta Designs, showing direct costs, manufacturing overhead, and net income calculations. 3) It gives examples of calculating predetermined overhead rates based on direct labor costs and hours as well as machine hours, and applying different overhead rates to sample

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    Chapter 2

    E15. [LO 3, 6].

    Cost Summary: Job 325


    Direct Material $ 10,000
    Direct Labor (250 hours x $16/hour) 4,000
    Manufacturing Overhead:
    ($25 per direct labor hour x 250 hours) 6,250
    Total $20,250

    P1. [LO 3].

    a. Satterfield’s Custom Glass


    Schedule of Cost of Goods Manufactured
    For the Year Ended December 31, 2014

    Beginning balance in work in process inventory $ 210,000


    Add current manufacturing costs:
    Direct material $2,500,000
    Direct labor 3,000,000
    Manufacturing overhead 1,700,000 7,200,000
    Total 7,410,000
    Less ending balance in work in process inventory 300,000
    Cost of goods manufactured $7,110,000

    b. Satterfield’s Custom Glass


    Income Statement
    For the Year Ended December 31, 2014

    Sales $8,500,000
    Less cost of goods sold:
    Beginning finished goods inventory $ 500,000
    Add cost of goods manufactured 7,110,000
    Cost of goods available for sale 7,610,000
    Less ending finished goods inventory 400,000 7,210,000
    Gross profit 1,290,000
    Less nonmanufacturing expenses:
    Selling & admin. expenses 800,000

    Net income $ 490,000


    P2. [LO 3].

    a. Terra Cotta Designs


    Schedule of Cost of Goods Manufactured
    For the Year Ended December 31, 2014

    Beginning balance in work in process inventory $ 650,000


    Add current manufacturing costs:
    Direct material:
    Beginning balance $ 450,000
    Purchases 1,500,000
    Ending balance (200,000)$1,750,000

    Direct labor 2,500,000


    Manufacturing Overhead 650,000 4,900,000
    Total 5,550,000
    Less ending balance in work in process inventory 350,000
    Cost of goods manufactured $5,200,000

    b. Terra Cotta Designs


    Income Statement
    For the Year Ended December 31, 2014

    Sales $7,000,000
    Less cost of goods sold:
    Beginning finished goods inventory $ 750,000
    Add cost of goods manufactured 5,200,000
    Cost of goods available for sale 5,950,000
    Less ending finished goods inventory 350,000 5,600,000
    Gross profit 1,400,000
    Less nonmanufacturing expenses:
    Selling expenses 500,000
    General & admin. expenses 850,000 1,350,000
    Net income $ 50,000

    P6. [LO 6, 7].

    a. Predetermined overhead rate based on direct labor cost:

    $200,000 ÷ $300,000 labor cost = $0.67 per labor dollar

    Predetermined overhead rate based on direct labor hours:


    $200,000 ÷ 25,000 hours = $8.00 per labor hour

    Predetermined overhead rate based on machine hours:


    $200,000 ÷ 8,000 machine hours = $25 per machine hour

    b. Overhead based on labor cost


    Job 9823 Job 9824
    Direct material $ 1,000 $2,000
    Direct labor 1,400 1,400
    Mfg. overhead 938 938
    Total $3,338 $4,338

    Overhead based on labor hours


    Job 9823 Job 9824
    Material $ 1,000 $ 2,000
    Labor 1,400 1,400
    Overhead* 1,200 1,040
    Total $ 3,600 $ 4,440
    *Actual direct labor hours x $8

    Overhead based on machine hours


    Job 9823 Job 9824
    Material $1,000 $ 2,000
    Labor 1,400 1,400
    Overhead* 3,250 6,750
    Total $5,650 $10,150
    *Actual machine hours x $25

    c. Given that depreciation on equipment accounts for 75 percent of applied


    overhead costs, an allocation based on machine hours seems reasonable.
    However, users of the job cost information should keep in mind that the applied
    overhead portion of job cost is not an incremental cost.
    P18. [LO 9].

    a. The predetermined overhead rate is $2,750 per hour of operating room use.

    ($5,500,000 ÷ 2,000 hours = $2,750). The total overhead charge to Candice for
    3 hours of operating room usage is $8,250 ($2,750 x 3 hours).

    b. The total cost of the knee surgery is $24,250:


    Pharmacy $ 450
    Sterile supply 1,500
    Supplies other 4,500
    OR services 4,500
    Anesthesia 1,500
    Anesthesiologist 3,500
    OR overhead charges 8,250
    $24,200

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